Circle (CRCL) Stock Falls 68% From The Highs – Time To Buy?

TLDR

• Circle (CRCL) stock has dropped 68% from its peak of $298 in June to around $82, facing pressure as its 180-day lockup period expires this Friday.
• Mizuho Securities downgraded its price target to $70, citing concerns about falling interest rates, stagnant USDC growth, and rising distribution costs.
• Historical data shows 58% of IPOs that outperform before lockup periods tend to underperform afterward, with companies missing revenue targets seeing 10% average declines.
• JPMorgan takes an opposing view, upgrading Circle to “overweight” with a $100 price target, calling the current dip a “buy-low opportunity.”
• Circle beat third-quarter earnings expectations, but analysts warn that most of its revenue depends on interest from USDC reserves held in Treasury securities.

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Circle’s stock has taken a beating since its June IPO. The USDC stablecoin issuer saw shares peak at $298 just 18 days after launching on Nasdaq. Now the stock trades around $82.

That’s a 68% drop in less than five months. The decline accelerates as the company faces a critical test this Friday.

Circle Internet Group, CRCL

Circle’s 180-day lockup period expires two days after it reports third-quarter earnings. The lockup prevents insiders from selling their shares immediately after an IPO. When it ends, selling pressure often follows.

Mizuho analyst Dan Dolev looked at the numbers. His team studied over 750 IPOs with market caps above $1 billion. The pattern isn’t pretty.

About 58% of companies that beat the S&P 500 before their lockup ends underperform the index in the next 180 days. These companies see average declines of 2%. Things get worse for firms that miss revenue targets in their first year. They tend to fall 10% relative to the S&P 500.

Interest Rate Exposure Creates Risk

Circle makes most of its money from interest on USDC reserves. The company holds these reserves in short-term US Treasuries, Treasury repurchase agreements, and cash.

When interest rates drop, Circle’s revenue takes a hit. The Federal Reserve has been cutting rates. That squeezes the company’s main income source.

Mizuho downgraded its price target to $70 from $84. The firm maintains an “underperform” rating on the stock. Dolev warned that consensus estimates will likely trend downward over the coming years.

The analysts point to three main problems. Declining interest rates eat into profits. USDC circulation has been relatively flat. Distribution costs keep rising and eating into margins.

Competition in the stablecoin market is heating up too. USDC ranks as the world’s second-largest stablecoin by supply. Tether’s USDT holds the top spot. Other players keep entering the space.

JPMorgan Sees Buying Opportunity

Not everyone shares Mizuho’s pessimism. JPMorgan analyst Kenneth Worthington takes the opposite view.

The bank upgraded Circle from “underweight” to “overweight” this week. That’s a double upgrade. JPMorgan raised its price target from $94 to $100.

Circle did beat expectations in its third-quarter report. Both revenue and earnings came in above consensus estimates. JPMorgan highlighted growing acceptance of stablecoins in mainstream finance.

USDC leads that adoption trend. Major financial institutions have started integrating stablecoins into their operations. Circle benefits from being early to market with strong compliance standards.

The company launched its IPO in June with a bang. Shares rocketed over 200% on the first trading day. At one point, the stock hit around $250 per share.

That initial excitement has faded. The stock is down nearly 40% over the past month alone. Trading volume picked up as the lockup expiration approached.

Mizuho’s bull case price target sits at $251. Their bear case drops to $38. That wide range shows how much uncertainty surrounds the company’s future.

Circle’s business model ties directly to macroeconomic conditions. If rates keep falling and USDC growth stays flat, revenue pressure mounts. Distribution costs need to stay under control as the company expands.

The lockup expiration happens this Friday after Circle reports earnings. Investors will watch closely to see how much insider selling materializes and whether the stock can find support at current levels.

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